“New York Stock Market Predictions and Debt Ceiling Negotiations: Week in Review”

(New York = Yonhap News) Yonhap Infomax Correspondent Haram Lim = This week (22nd-26th), the New York stock market was involved in debt ceiling negotiations by US politicians and the minutes of the Federal Open Market Committee (FOMC) meeting of the US Federal Reserve System (Fed). It is expected to pay attention and try to rise.

Last week, all three major indices on the New York Stock Exchange rose, attempting to break out of the box range.

Over the past week, the Standard & Poor’s (S&P) 500 index has risen 1.65%. The S&P 500 is close to its technical resistance level of 4,200, nearing its highest level in about nine months since August of last year.

The Nasdaq index soared 3.04% over the week. The Nasdaq index also rose to its highest level in nine months. The Nasdaq index’s weekly gain was the largest in about two months since the end of March.

Last week, the Dow Jones 30 Industrial Average rose 0.38%.

Last week, the New York stock market rose sharply on expectations of a deal between the political world and the debt ceiling.

The direction of the market is likely to be determined by how the debt ceiling negotiations develop this week as well.

Investor sentiment improved significantly last week when US President Joe Biden and US House Speaker Kevin McCarthy declared that there would be no default in the US.

Negotiations seemed to be going smoothly after that, but later in the week it seemed that they ran into trouble again.

According to foreign media, working-level negotiations between President Biden and the Republican Party are deadlocked. The two sides resumed talks last Friday, but no progress was made and negotiations were suspended. It is also known that the schedule for the next political meeting has not been set.

It is not clear whether there is a fundamental difference between the two sides’ positions, or whether it is an intentional stalemate for negotiations.

However, with only 10 days before June 1, the ‘X-date’ that US Treasury Secretary Janet Yellen warned about, the deadline is getting tighter and tighter.

President Biden canceled his visit to Australia in consideration of the urgency of the negotiations on raising the debt ceiling, and returned to the United States after finishing the G7 meeting.

Secretary Yellen is intensively warning that if the political world fails to reach a deal to raise the debt ceiling and the United States falls into default, it will be disastrous for the United States and the global economy.

However, cautious optimism is detected in the financial market. Financial market participants see the risk of the US federal government going into an unprecedented default is low.

The expectation that the political world will not eventually push the United States into default is a situation that supports the sentiment.

The Volatility Index (VIX) of the Chicago Board Options Exchange (CBOE), called Wall Street’s ‘fear index’, showed a 16 line. CNBC, an American economic broadcaster, quoted an expert and said, “The fear index shows that fear is not high among financial market participants.”

Some point out that the market’s optimism about the conclusion of the negotiations is excessive.

Some experts raised the analysis that the debt ceiling negotiations are bad news for the stock market regardless of whether or not an agreement is reached. If negotiations fail, stock prices are expected to undergo a major correction due to an immediate economic downturn. The problem is that even if the negotiations are concluded, there may be an adverse effect of recovering liquidity in the stock market. When the negotiations are concluded, if the US Treasury Department issues new bonds, this can lead to liquidity recovery in the financial market.

Meanwhile, attention is also focused on the policy path of the US Federal Reserve.

Last week, Fed Chairman Jerome Powell said he may not need to raise interest rates as much as he thought.

“As a result, our policy rate may not need to rise as much as we would have liked to achieve our target,” Powell said in a conversation with former Fed Chairman Ben Bernanke, referring to banking risk.

This is interpreted as a more mitigating nuance than recent remarks by senior Fed members.

However, as the market’s interest shifted to the debt ceiling negotiations, the impact of Chairman Powell’s remarks was somewhat diluted.

This week, the Fed releases the minutes of the FOMC meeting held in May. Public remarks from a number of Fed officials were also scheduled.

The main economic indicator to be released this week is the Personal Consumption Expenditure (PCE) price index, which is an inflation indicator that the US Federal Reserve places importance on. Experts compiled by The Wall Street Journal (WSJ) predicted that the April core PCE price index would rise 0.3% month-on-month and 4.6% year-on-year. This is the same level as the previous month.

Provisional growth rates for the first quarter will also be released. The first quarter gross domestic product (GDP) announced earlier was a 1.1% annual rate increase, far below expectations. The Purchasing Managers’ Index (PMI), which reveals the growth of the manufacturing and service industries, is also released.

Among the companies, semiconductor companies such as Nvidia were scheduled to announce their performance. In addition, American retailers Nordstrom, Kohl’s, Best Buy, Dollar Tree, and financial firm Raymond James Financial will announce their earnings.